A Little and Often - Payroll Donations
It is a little known fact that individual charitable donations are eligible for tax credits. Individuals can claim a 33.33% tax credit for all donations over $5 to an IRD approved charity, of which Hospice Taranaki Inc is one. So what might this look like? Well, if you donate $100 to a registered charity, you can claim back $33.33 in tax, essentially meaning the taxman covers the remaining $33.33 to your chosen charity!
Typically it's a bit of a process to claim your tax credit, but with Payroll Giving employers can allow their staff to donate to charities directly through their payroll system. It's a seamless way for you to give back to your chosen charity while automatically redeeming your tax credit in the process. The money is donated directly from your pay and you receive an immediate tax credit (33.33% of the donation amount) that reduces the amount of PAYE deducted from your pay.
How your employer would set up payroll giving:
Your employer has a few key responsibilities when offering payroll giving:
- They must deduct the chosen donation amount from your earnings
- The appropriate tax credit for the donation has to be worked out (33.33% of the donation
- The tax credit is recorded on the payday filing employment information schedule
- The donation must be sent to your selected charity within a specified time frame (Hospice Taranaki Inc account number - 15 3948 0365008 80)
Your responsibilities when joining payroll giving:
If you wish to join your employer's payroll giving scheme, you need to:
- give your employer our name (Hospice Taranaki Inc)
- tell them the donation amount you wish to make
- advise in which pay periods you wish the donation to be made
- and give your employer our bank account details (TSB bank 15 3948 0365008 080).
Note to employers - why your company should offer payroll giving.
So is your company thinking of getting on board? Good call! A few reasons why the IRD thinks offering payroll giving is a fantastic initiative:
- It simplifies the process of donating to charities and claiming the tax credit
- It shows good corporate citizenship, which is important for the long-term well-being of your company and your employer brand
- Employees want it! It's always a good thing to offer initiatives that lead to loyal and supportive staff and lower turnover
- It's a low-cost, easily administered way of encouraging generosity within the community.
Studies have found that 72% of employees feel a stronger sense of loyalty to their company when they're actively giving back to the community through supporting a charity. About half of all NZ companies contribute financially to community organisations and charities in some form - it's simply becoming the Kiwi way.
If you're an employer looking to offer payroll giving or have an employee hoping to start using payroll giving, the IRD website has some helpful resources.